“All eyes on sterling over the next few days as the pound will remain sensitive to news from the Conservative conference,” said Peel Hunt economist Ian Williams.

Hammond said the UK had the fiscal capacity to cope with leaving the European Union without any agreement but believed the mood in Brussels was to reach a divorce deal.

His comments lifted the pound and that in turn sent shares in big multinationals BAT, Compass Group and Shire down between 0.5 and 1.2 percent.

Oil companies Shell and BP both rose more than 0.5 percent, as Brent prices rose to their highest since November 2014 ahead of U.S. sanctions against Iran.

Airlines, which have recently been hit by rising oil prices which could increase their fuel costs, were under further pressure after a profit warning from Ryanair.

Europe’s largest low-cost carrier cut its forecast for full-year profit by 12 percent and said there could be worse to come if recent coordinated strikes across Europe continue to hit traffic and bookings.

Berkeley Group, Barratt Developments and Persimmon were among the top fallers on the FTSE, all down over 1 percent on plans by the Conservative Party to levy an extra fee on foreign buyers of homes in Britain.

“The UK PM has plans to impose higher taxes on foreign buyers of UK properties, roughly half of all residential transactions in Central London, which could weigh on FTSE housebuilders,” said at Accendo Markets analyst Mike van Dulken.

United Utilities rose 2.6 percent after a Deutsche Bank upgrade to buy.

Among the smaller companies, Avocet Mining dropped 17 percent after warning that it could be broken up as the gold miner continues talks with its largest shareholder to restructure its debt.

Just Group fell 9 percent after the British pensions provider said its finance chief would step down at the end of the month, days after proposed regulatory changes forced the company to delay dividend payments. (Reporting by Danilo Masoni Editing by Raissa Kasolowsky)